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Steve Fraser: The Specter of Wall Street

October 2, 2008

Steve Fraser

Wall Street sits at the eye of a political hurricane. Its enemies converge from every point on the compass. What a stunning turn of events.

For well more than half a century Wall Street has enjoyed a remarkable political immunity, but matters were not always like that. Now, with history marching forward in seven league boots, we are about to revisit a time when the Street functioned as the country’s lightning rod, attracting its deepest animosities and most passionate desires for economic justice and democracy.

For the better part of a century, from the 1870s through the tumultuous years of the Great Depression and the New Deal, the specter of Wall Street haunted the popular political imagination. For Populists it was the “Great Satan,” its stranglehold over the country’s credit system being held responsible for driving the family farmer to the edge of extinction and beyond.

For legions mobilized in the anti-monopoly movement, Wall Street was the prime engine house of monopoly capitalism, leaving behind it a trail of victimized businesses, consumers, captive municipalities, and crushed workers. For Progressive reformers around the turn of the twentieth century, Wall Street’s “money trust” was the mother of all trusts, its tentacles — and the octopus was indeed a popular image of the time — choking off economic opportunity for all but a favored few. Its political power in Congress, in presidential cabinets, in statehouses, in both major political parties was seen as so overwhelming as to threaten to suffocate democracy itself.

All the periodic panics and depressions — 1873, 1884, 1893, 1907, and 1913 — that, with numbing regularity, punctuated economic life until the Crash of ’29 and the Great Depression brought the house down seemed to begin on the Street. And whether they actually began there or not, all the misery that followed in their wake — the homelessness, the armies of tramps and hobos, the starvation, the bankruptcies, the broken families, the crushing sense of dispossession — was regularly laid at the feet of the Street.

Despite the hot-tempered invective directed its way, the “Great Satan” didn’t face its comeuppance until the New Deal in the 1930s. Then, all its transgressions — its speculative greed, its felonious insider-dealing, its cynical manipulation of popular credulity, its extravagant incompetence and seemingly limitless capacity for self-delusion — left Wall Street truly vulnerable. Its reputation had struck bottom.

Wall Street’s Invisible Decades

Just like our Wall Street heroes of the recent past, so, too, back in the 1920s the savants of the Street claimed credit for the rickety prosperity of the Jazz Age. With the Crash they took the blame for the disaster, just as they had taken the credit for the prosperity, and were despised for their hypocrisy as well. Just as seems to be starting to happen today, Congressmen, some of whom had spent their careers genuflecting before the titans of Wall Street, suddenly hauled them before investigating committees, there to be defrocked, treated to a withering storm of biblically-inspired injunctions and Shakespearean curses, and indicted in the court of public opinion. Wall Street was, as it now seems about to be again, excommunicated.

Suddenly weak beyond compare, the Street was powerless to resist Franklin D. Roosevelt’s regulatory state. In rapid succession came the Glass-Steagall banking act and the Federal Deposit Insurance Corporation, the two securities acts of 1933 and 1934, the creation of the Securities and Exchange Commission (SEC), the Public Utility Holding Company Act, and much more. When, in 1936, the President summoned the people to battle against the “economic royalists” everyone knew just who he was talking about.

It’s long been said that FDR’s New Deal saved capitalism from itself. That is true. One ironic consequence of that fateful turn of events was, politically speaking, to cloak Wall Street in invisibility. After all the shouting was over, after the installation of legislative reforms had further chastened an already cowed Street and constrained its penchant for financial wilding, it ceased to function as the magnetic north for all those troubled by the inequities, injustices, and deformations of capitalism.

During the long prosperity of the post-war years from 1945 to 1970, when the income and wealth inequalities that had always been associated with Wall Street narrowed dramatically — economic historians know this as “the great compression” — news of the Street retreated to the business pages and remained there…

READ THE REST OF THIS POST AT TOMDISPATCH.COM

Steve Fraser is the co-director of the American Empire Project at Metropolitan Books and the author, most recently, of Wall Street: America’s Dream Palace (Yale University Press).

Copyright 2008 Steve Fraser

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